US Initial Jobless Claims Signal a Struggling Labor Market
Initial Jobless Claims measures the number of individuals filing for jobless benefits for the first time during the past week. A lower-than-expected reading is essentially better for the US job market, as more people remain in the workforce.
Theoretically, less people applying for initial unemployment benefits, the better it is for the US economy. When emerging unemployment is low and less than expected, it indicates a relatively healthy economy, or in this case, a recovering economy.
In its weekly report, the U.S. Department of Labor said in the week ending May 26, the advance figure for seasonally adjusted initial claims was 383,000 worse than the estimate of 370,000, which was an increase of 10,000 from the previous week's revised figure of 373,000. The 4-week moving average was 374,500, an increase of 3,750 from the previous week's revised average of 370,750.
The previous week's figure was revised up to 373,000 from 370,000.
Continuing Jobless Claims measures the number of unemployed individuals who continue to be eligible for unemployment benefits.
In its weekly report, the U.S. Department of Labor said the advance number for seasonally adjusted insured unemployment during the week ending May 19, was 3,242,000 better than the estimate of 3,250,000, which was a decrease of 36,000 from the preceding week's revised level of 3,278,000. The 4-week moving average was 3,263,750, a decrease of 12,000 from the preceding week's revised average of 3,275,750.
The previous week's figure was revised up to 3,278,000 from 3,260,000.
US equity futures saw an initial move lower after the 8:30 a.m. ET release. Currently, Dow Jones Industrial Index Futures are trading about 29 points higher in pre-market trading.
Traders who believe that jobless claims is a leading indicator for the US economy, you might want to consider the following trades:
- Long general retail companies like JC Pennny (NYSE: JCP) because as more people remain in the workforce, the more likely people will spend their residual income, as they continue to have a job.
- Also, long Consumer Discretionary companies like Target (NYSE: TGT) or the Consumer Discretionary ETF (NYSE: XLY)
Traders who do not believe that the weekly jobless data is a leading indicator for the general US economy, you may consider alternative positions:
- Long Consumer Staple companies like Procter & Gamble (NYSE: PG) and Colgate (NYSE: CL) because even if less people remain in the workforce, they still need to buy staple products like shampoo and toothpaste.
- Also, short big-ticket appliance makers like Whirlpool (NYSE: WHR) if the claims trend is worse-than-expected.
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